DIRECTOR BOLTEN: In his State of the Union address, the President asked
Congress to give him line-item veto. Today, the President is transmitting
to Congress legislation that would give him a constitutional line-item
veto. The legislation is designed to do two things: one, to give the
President a scalpel to reduce unnecessary or wasteful spending; and,
second, to improve accountability and cast a brighter light on the practice
of slipping earmarks into bills at the last minute.

Most of you are aware that the Congress did enact a line-item veto which
was available to the President in 1996, but the Supreme Court struck that
law down as unconstitutional as drafted. Since 1996, when the law was
struck down, earmarks have increased dramatically, and that's part of the
reason why the President has decided to send forward specific legislation
now to restore a line-item veto authority and, in particular, restore one
that passes constitutional muster.

What this legislation does -- by the way, the title is the Legislative
Line-Item Veto Act of 2006. It provides the President the authority to
single out wasteful discretionary or mandatory spending, or special
interest tax breaks given to a small number of individuals and to put them
on hold. During the time that the spending line-item is on hold, the
President can send legislation to Congress to rescind the line-item. The
legislation under the statute would be considered within 10 days of
introduction on an up or down basis without amendments and could be passed
by a simple majority and could not be filibustered.

This authority would allow the President to hold up to the full light of
public scrutiny wasteful spending that might have been passed as part of
larger legislation. As you all are undoubtedly aware, spending legislation
usually comes to the President in the form of very large bills, many of
them with tens of billions of dollars of spending in them. And it is not
sufficient for them to have authority merely to veto the entire bill. This
would give him the opportunity to line out specific items of wasteful or
unnecessary spending.

Similar legislation has drawn broad support in the past. And, in fact,
Senator Kerry proposed as part of his campaign in 2004, essentially the
kind of line-item veto authority that the President is proposing to the
Congress today.

Finally, while it's a very powerful tool to reduce wasteful spending and
rein in overall spending, a line-item veto authority alone is only just one
of the tools to control spending. We need to continue progress that which
-- we need to continue measures in which Congress has made a lot of
progress, especially in the last year, to hold discretionary spending down.
And, in fact, as in last year's budget, the President proposed in this
year's budget to pose an actual cut on non-security discretionary spending,
and also to slow the growth in entitlement spending. So there is a much
broader spending restraint agenda that ought to be pursued, but this
particular element is a very important part.

Scott, that's it.

Q Hey, Josh. Would you go back over the details of legislation and tell
us what it is that you think enables this to avoid Supreme Court denial, as
was the case in '96?

DIRECTOR BOLTEN: Jim, the '96 case centered around the constitutional
concern of the President having authority unilaterally to cancel spending.
We believe there are a variety of ways around it, around that ruling, that
there are a variety of ways that a constitutional line-item veto could be
constructed.

The one that the President has sent forward today is I think among the most
airtight. In fact, I don't think serious constitutional question could be
raised about it, because instead of giving the President the authority
unilaterally to line out some spending, what the President does is he takes
the spending that he wants to take out of a bill, puts it into a separate
piece of legislation, sends that forward to the Congress; the Congress then
has -- that legislation then is entitled to expedited procedures in the
Congress, and is entitled to an up or down vote in both houses within 10
days.

So the Congress, under the procedure that the President has proposed, is
proposing today, still needs to act, actually needs to adopt legislation
that would rescind the previously enacted spending. And going through that
process, I think most constitutional scholars will agree, would put this
procedure in a situation where it would not be subject to any serious
constitutional challenge.

Q Now why is it entitled to expedited procedure? Is that part of the
legislation?

DIRECTOR BOLTEN: Exactly. The legislation would say that the -- it lays
out a number of procedural steps, including its introduction and referral
to committee, how quickly the committees must act -- if they're going to
act. If they don't act within, I believe it's five days, then it's
automatic, the bill is automatically available for floor action. And the
bill that's available for floor action can't be delayed in its
consideration. So it's designed to have been an airtight way to guarantee
an up or down vote within 10 days in both Houses.

Now the Congress can always, by majority vote -- by simple majority vote,
refuse to enact it. But then that will have been done in the full light of
day. And if there is a majority in both Houses to take out the spending,
as I think we're hopeful there would be, then that becomes a statute on its
own, and the President would sign the statute and the spending would be
rescinded.

Q And that would take precedent over whatever had been passed
previously?

DIRECTOR BOLTEN: Exactly.

Q Thanks.

Q Why is the President proposing this legislation only now? He's talked
a lot about the need to curb federal spending, but I haven't heard him talk
much about a line-item veto. Why the delay?

DIRECTOR BOLTEN: A line-item veto has been part of the President's
proposals in each of his budgets over the last several years. But the
reason why he is now separately sending forward today a specific proposal
and asking the Congress to act on it has as much to do with the fertile
ground that exists now in Congress. Congress is taking up issues of
earmark reform. They are taking up issues of spending reform.

So now it seems like a -- while the President has been supportive of a
line-item veto since he entered into office, now seems like a very good
time to move, and we're optimistic, particularly given the supportive
remarks from leadership on both sides of the Capitol. We're optimistic
that this may be a year in which the Congress would be prepared to move and
provide the President with a line-item authority.

Q Hi there. I was just wondering, have you been speaking to specific
lawmakers? I remember last time, I think it was McCain and Coates who are
very important in the Senate. And I just wondered whether you're sort of
-- in pushing this legislation to particular lawmakers?

DIRECTOR BOLTEN: We have. We've been talking to the leadership on both
sides of the Capitol and to other key members, relevant committee chairmen.
In the Senate, I believe that Senators Frist and McCain are expected to be
supportive of this legislation, maybe introducing it or something very
similar to it. We need to get the legislation up there, let them review it
in detail and see whether it's what they want to support. But we have had
consultation with -- before sending this legislation up, with a number of
members.

I've just been handed a note saying that Senator Frist is introducing it,
along with the Republican Whip, Senator McConnell and with Senator McCain
-- that the three of them will be jointly introducing this proposal.

Q Thank you.

DIRECTOR BOLTEN: Thank you.

Q Yes, Director, could you talk about what happens if Congress doesn't
take -- doesn't follow the subscription in this legislation, doesn't take
up one of these packages within 10 days? Does the President essentially
get his way? Or is there any sort of enforcement mechanism that forces
Congress to actually do something on it?

DIRECTOR BOLTEN: No, there's nothing -- if Congress fails to act, there's
no particular mechanism that can force them to act, but the statute is
drafted in a way that essentially gives it a privilege on the floor of both
Houses. And I believe if there were just one member in each House that was
willing to call for the bill to be brought forward, then unless the
parliamentarians were in some fashion overruled, then the legislation would
automatically come up.

The difficulty for a lot of legislation is, in the Senate in particularly,
that it often requires a super majority even to get a bill considered on
the floor. And this would provide you the opportunity -- the statute is
drafted in a way so that it comes about as close as you can come to
guaranteeing a vote. I don't think it's absolutely, a hundred percent
certain it would get a vote, but I think it would require an extraordinary
series of circumstances that would prevent the legislation from getting a
vote.

Q Thank you.

Q I'm curious, Senator John Kerry has just put out a press release
saying that he supports the item -- line-item veto, at least in concept, if
not in the form of the bill that you're proposing. But have you folks been
in touch with him, in terms of getting this thing -- getting a bipartisan
package put together?

DIRECTOR BOLTEN: I don't know that we've been in touch with Senator
Kerry's office directly. I believe, though, that the proposal that the
President sent up today is entirely consistent with the proposal that
Senator Kerry made during the 2004 campaign. I'm just looking here at
something, at a little printout from their original campaign page, which
says that under this proposal, the President, in signing a bill, could send
back to Congress a list of specific spending items and tax expenditures he
disapproves; new legislation rescinding any item on that list would be
guaranteed an expedited up or down vote.

Q That sounds fairly similar.

DIRECTOR BOLTEN: Yes, it does sound -- so it may be that he has some
technical differences, but if Senator Kerry remains consistent with the
proposal he put out in 2004, I think he should be supportive of the
approach that the President has sent forward today.

Q Director Bolten, how powerful a tool do you think this would be in
practical terms? I mean, it only takes -- you have to get 50 percent,
which means, if 50 percent are opposed, they could reject this, and if you
send up a bundle, there could be one sympathetic thing in that bundle that
people will hang their hat on to try to preserve. So how much spending do
you think you could actually take out, if you had this authority?

DIRECTOR BOLTEN: It's a good question. I don't want to speculate on what
amount would actually be taken out. It seems to me a lot of the good
effect of having this authority in the first place would be in its
deterrent -- that is, that the Congress, in the first place, is already
moving toward earmark reform that is likely to involve greater elements of
transparency. And I'm very hopeful that they'll adopt that.

On top of that, I think if members know that a special interest provision,
especially one slipped in, in the dark, is likely to be susceptible to
being taken out in a rescission package from the President, that it seems
to me there would be a deterrent effect on that. And then beyond that, for
what did get through, I think it can be an important and effective tool,
but it's only one in the arsenal. And we need to do -- pursue all of the
other things that I mentioned in my opening remarks.

Q But why hasn't Bush been more active in using his existing rescission
authority? Given the fact that both Houses of Congress are of the same
party, couldn't you shame them into delivering votes under existing
authority?

DIRECTOR BOLTEN: Well, there is existing authority to send up rescission
packages, but they -- and I think there's been something in the Impoundment
Act for the last 30 years. But we've been unable to find any instances in
which a President has successfully been able to use that authority. I
think the principal defect of the authority that exists now is that there
is no particular guarantee that a provision can or will be brought to a
vote, or that a bill would not be amended once it hit the floor. And so
that makes it very difficult to move a vehicle like that, even if everybody
was agreed that on a particular appropriations bill, almost everyone was
agreed, except for the sponsor, that this provision ought to come out, it
would be very hard to control that vehicle if it were amendable on the
floor once it got to the floor. The current authority is a very difficult
and awkward way to do business. I think the legislation that the President
is sending forward today cures that problem.

Now, in the bigger picture, the President has set some tight spending
targets, especially in the last few years. And the Congress in its
appropriations bills has tended to meet those targets -- and not always
exactly in the way that the President has requested. But overall spending
limits have tended to have been met.

Last year, the President asked that the Congress send appropriations bills
that kept the overall growth in discretionary spending below the rate of
inflation. The Congress delivered on that. He asked that the non-security
elements of discretionary spending actually be cut. The Congress delivered
on that. I often get asked why the President hasn't vetoed any bills. On
his behalf I have issued probably dozens of veto threats, going in
particular to the kinds of limits we have talked about. And last year's
experience shows that the Congress and especially the congressional
leadership have been cooperative in delivering those kinds of limits.

With respect to the specifics of an individual spending item with which the
President might disagree, even though it's within an overall spending cap,
I think this procedure that we're sending forward today would cure the
difficulty that arises in trying to get that out of the spending once the
bill -- once the overall bill is adopted.

Q I was just wondering in terms of the tax provisions, is it a change in
position to now include the idea of targeted tax provisions as something to
be cut out? And also when do you guys plan on sending the actual -- the
language itself, when do you plan on distributing that?

DIRECTOR BOLTEN: I'm looking at Scott now. The language has not actually
gone up yet; is that right? Yes, it should be very shortly. We do plan on
-- okay, yes. We do plan on sending it up today, and it will be posted on
the website, I would expect pretty soon after we're done with this call.

Refresh me on the first question. Tell me what you mean by change --

Q Whether it's a change in position to include targeted tax provisions.
Because if I recall correctly, in the last two budgets at least, the
line-item veto language only talked about spending, if I recall correctly.
I may not recall correctly.

DIRECTOR BOLTEN: I'm not sure you are recalling correctly. But my
recollection is that we probably didn't describe the proposals in as much
detail that would have permitted addressing targeted tax provisions. But I
don't think this is a change in position to include targeted tax
provisions. I think that would always have been in a specific legislative
proposal. It is in the one the President is sending forward now.

And I think in past versions of this kind of legislative line-item veto
authority, they have typically also included targeted tax provisions.
There may be some differences among -- in the proposals on how you define
the targeted tax provisions. We define it as benefiting 100 or fewer
taxpayers.

Q Thank you.

Q Hi. I was going to ask also about the -- why you were asking for this
in view of the failure really to use the existing rescission authority, and
you addressed that. But I'll just follow up and ask, you mentioned that
there's -- you found no evidence that this had been used successfully by
past presidents, but like the questioner noted, you've had a President who
for six years has governed with his own party. Do you have a number on how
many rescissions President Bush has actually sought during his term?

DIRECTOR BOLTEN: In the technical sense of rescissions under the
Impoundment Act, I don't think we've tried to use that, and as I mentioned,
we don't -- I don't think we have any cases of previous presidents
successfully using it. There may have been one or two attempts. It was
kind of hard to figure out from the historical documents over the last
30-some years that the provision has been in place. But we were unable to
find evidence of its successful use.

Q But you never thought of using it, given that none of those past
presidents, except for brief periods, had a Congress of their own party?

DIRECTOR BOLTEN: I would have -- maybe, you're probably much better on the
history than I am, but I would expect that there be a number of presidents
in the past 30 years who did have Congresses of congenial parties. But I
don't think -- but it's not really an issue of having control of one House
or another. As you know, it's very easy for a minority to block a bill
from coming up. It's very easy for one person to propose an amendment that
can ball up an entire bill.

So unless there's -- unless it's like the Defense Appropriations Bill or
something like that, that needs to get enacted, it's very easy to prevent
something that needs -- that doesn't really need to get enacted on the spot
from being enacted. And it's very easy to add all sorts of additional
material to it that unduly complicates it.

So the procedural array -- the procedure is very much arrayed against a
President's ability to rescind individual spending items, regardless of who
controls both Houses of Congress, and this legislation is designed to cure
that.

Q And if I could just ask a quick follow-up to someone else's question,
as well, that was -- you mentioned that the enforcement of this would be in
-- the fact that the legislation you proposed would accord a privileged
status under the rules for the -- and virtually force a vote. Do you have
assurance from people from leadership on the Hill that that language will
stay in the final legislation as it makes it's way through Congress?

DIRECTOR BOLTEN: No. Well, I don't think they can give us assurance of
what final legislation will look like --

Q Or at least a suggestion that they'll try to protect it.

DIRECTOR BOLTEN: Well, I think Senator Frist has certainly indicated that
he's prepared to introduce and support our version of the legislation. So
I would think that while there are a number of ways to skin this cat
procedurally, I don't think the final bill has to look exactly like what
the President offered. I would expect that the leadership would understand
and agree that without some relatively airtight protections for an up or
down vote on a bill, we're not really advancing the ball very much. And
our sense is -- from leadership and from key members -- is that they do
want to advance the ball in this area in a responsible way that respects
the balance of authorities and responsibilities between the two branches.

Q Thank you.

DIRECTOR BOLTEN: Thank you.

Q Yes, I just want to make sure I understand the procedure correctly.
Once the President signs a bill or more than one bill that has provisions
in it he'd like lined out, is there a specified time period in which he is
to bundle these to send up to Congress?

DIRECTOR BOLTEN: There is not a specified period within which the
President needs to send up the legislation. Now, I would expect that
presidents would want to move relatively promptly because, for example, in
the case of a one-year appropriation, you'd want to move relatively
promptly to -- before too much of the spending got underway in that
appropriation. And the way the appropriation cycle works now, it's common
that appropriations bills are not enacted until the fiscal year has already
begun. So spending authority can kick in immediately.

So I would expect the President would want to step in fairly promptly and
send his bundle up. But in the proposal that we've sent up there is no
limitation on the time in which the President could do that. And bear in
mind that the President can also do it for mandatory spending and for
targeted tax provisions where you wouldn't face that -- what amounts to
basically a one-year clock that normally applies to appropriations.

Q With respect to mandatory spending, and this whole issue of
entitlement reform, you said this year would be probably fertile ground for
addressing the line-item veto. But I don't recall, is there a specific
deadline for this entitlement reform panel to come forward with
recommendations? Is this something you want to have done this year, as
well? I just remember deadlines for that commission.

DIRECTOR BOLTEN: I think what you're referring to is the President's call
in his State of the Union address for a bipartisan panel to come together
and address entitlement reform. No, there's no specific time limit on it,
other than that -- the sooner the better. But however long it takes, it's
a project of utmost importance for the fiscal health of the country, and
something that is, I think, going to be enormously -- if possible,
enormously advantageous to our long run fiscal picture, but we understand
it's not something that's likely to be done overnight.

Q Director Bolten, I have two questions. One, you mentioned prior veto
threats, but wouldn't it carry more weight if the President actually did
veto a spending bill? And why hasn't that been tried prior to seeking
line-item veto? And then, secondly, about the line-item veto, is there
specific language in the Court's 1998 decision that you could point to that
you used to craft this language that you're using now?

DIRECTOR BOLTEN: Let me take the second one first. I may ask you to talk
to our General Counsel specifically about the Supreme Court's decision.
But as I mentioned at the outset, the concern that the justices raised
there related to the President's ability unilaterally to line out some
spending. And this is a situation in which the proposal that the President
is sending forward today is very different in that it requires subsequent
action by the Congress in order to actually effectuate the rescission.

So I think constitutional scholars will agree that this proposal doesn't
even get into the neighborhood of concern that the Supreme Court was
raising. And I don't think there could be any question about serious
constitutional challenge to it.

Now, refresh me on the first part.

Q The first part was about the veto threats that you mentioned before.
I just was wondering why hasn't he actually done an outright veto?

DIRECTOR BOLTEN: The President hasn't vetoed an appropriations bill
because he hasn't needed to. The Congress has lived within the limits that
he has set on appropriations bills -- as I said, not always with exactly
the mix of spending that the President has requested, often with items that
the President would not have included in a bill that the administration was
writing on its own. This procedure was designed to cure that defect. But
the President has not vetoed so far any spending bills because when he has
outlined his overall spending targets, the leadership and appropriators
have stepped forward and lived within those limits.

Q I wanted to ask you to go back to something you said at the beginning
and make sure I understand. You talked about putting a hold on spending.
And I remember when you were testifying earlier and put the budget out, you
actually had a different form of this proposal. You talked about enhanced
rescissions being great, but you were also interested in something quite
different -- which was a much more strengthened executive authority to
defer spending for a length of time before deficit reduction. What
happened to that?

DIRECTOR BOLTEN: You're right that we have had a variety of proposals, or
there are a variety of proposals that get to the underlying essence of a
line-item veto authority. We had described in our budget another mechanism
that would be an attempt to construct a constitutional way of giving the
President more unilateral authority to line out spending items by deferring
the spending. Our lawyers felt that that had a good chance of passing
constitutional muster. But unlike the provision that we are sending
forward today, there is the possibility, I think, of disagreement among
scholars on the constitutionality of that.

And, second, and more important, the proposal that we are sending forward
today is the one that seems to be attracting the most enthusiasm on Capitol
Hill. And I think what we wanted to focus on, at least at this moment, was
the kind of authority that we thought had the best chance of getting
enacted this year. There are a lot of ways to skin this cat. This is a
very effective way, and so we thought we -- the President made the judgment
to go forward with the one that is most likely to attract support on the
Hill now.

Q Two other quick questions. Some lawmakers have pointed out that the
President would be very effective if he paid attention to what was in
report language, which is where a lot of congressional spending emerges,
it's not in the legislative language at all. So the question is, are you
going to do anything to highlight that?

And then the third question I had was about the politics of this. You
know, President Clinton found it quite a challenge to figure out what is
someone's pet pork and someone's passion, and to use it at a time of his
choosing that would not alienate his friends. So the two questions are,
report language and the politics of trying to use this in a second term at
the end of a presidency.

DIRECTOR BOLTEN: On report language, it is correct that a lot of earmarks
show up in report language. The proposal that we're sending forward today
would make it possible actually to line out the spending. If the
administration were to ignore report language, then that spending would
still be there. The money would still be available, but it wouldn't
necessarily be available for the specific purpose that was included.

Q So you could log it out and then re-channel it?

DIRECTOR BOLTEN: If you were to ignore report language. The other problem
is that if the administration were across-the-board to ignore report
language, then those earmarks would presumably drift over into legislative
language, which -- well, there might be some salutary effect of that, to
give it more clarity in the light of day, but it wouldn't really get to the
underlying problem.

If the President had the kind of authority in place that we're proposing
today, he could line out a portion of spending -- let me see if I can give
an example here. If there were $100 million worth of spending for a
particular purpose, and there was a $10-million earmark in report language,
under our proposal, the President could send forward a $10-million
rescission and indicate that what he was blocking was the spending
connected to the earmark in the report language. So that would really be
the effective way to go at the problem.

Q So he'd be using a pry bar to try to get at something he really can't
legislatively, but he'd be calling it to their attention and saying this
is what I'm going to do if you don't get rid of it?

DIRECTOR BOLTEN: I think -- well, in the example I was giving, he would --

Q Because he can re-channel the money.

DIRECTOR BOLTEN: Yes. In the example I was giving, he would actually be
taking the money out. Now, refresh me on your second question.

Q The politics of it.

DIRECTOR BOLTEN: The politics? Yes, the politics can be hard, and the
President understood that going into this. But that's part of being
President, is making some hard choices and sometimes finding yourself in
conflict even with friends and supporters on the Hill. But if it's the
right thing to do, then the President will be inclined to do it.

Q Did he have it as governor?

DIRECTOR BOLTEN: Very good question, Alexis. I do not -- there are 43
states that have some form of a line-item veto. Hang on one sec, let me
see if my book tells me here. In Texas, there was a form of line-item veto
in effect when the President was governor.

Q Thanks.

Q I was curious about -- does the President intend to go after every
single earmark? And if he doesn't do that, doesn't he open himself up to
criticism that he's letting one political favor go through over another?
And the second question is, how much of an expansion of presidential
authority do you see here? Modest, big, whatever?

DIRECTOR BOLTEN: To the second question first, I see a balancing of
authority. With this proposal, I think the responsibilities of the two
branches would be well balanced in that the President would have the
ability to line out an item, but only with the approval of a majority of
Congress. It seems to me that's a responsible balancing of the
responsibilities that ought not be considered a challenge to those who are
staunch defenders of legislative prerogative.

Refresh me on the first please.

Q The first question has to do with how do you pick among earmarks? I
mean, are you going after all earmarks? Are you going to try to -- doesn't
that get the President a messy little political game in Congress?

DIRECTOR BOLTEN: Let's wait and see. And one step at a time, let's get
the procedure in place. I don't think that you would necessarily see any
President going after all earmarks all at once. There is constitutional
authority in the legislative branch to say how the money will be spent.
The important part about earmarks is that they need to be transparent, done
in the light of day, and as we dictate how spending is allocated, it needs
to be done in a way that's likely to benefit everybody -- not a particular
jurisdiction.

Q Back to this issue of report language, I'm just sort of curious why
there isn't -- why the President doesn't consider really going after some
of these earmarks, particularly ones that have been considered to be
egregious by groups and put out a list of -- here is a list of earmarks
that my agencies have found particularly to be wasteful and I'm not going
to do them -- and sort of pick a fight with Congress and force them to put
it in legislative language?

DIRECTOR BOLTEN: Well, overall, we have gone after a number of earmarks
and put them -- proposed them for elimination in subsequent budgets. We've
published a volume of major reductions and eliminations. They go to some
of the broader issues that have been raised. But like I said, simply
targeting earmarks that are in report language doesn't necessarily get at
the problem because I think, A, earmarks are likely just to drift over more
into legislative language; and, B, ignoring an earmark in report language
doesn't necessarily get rid of the spending, which this legislation that
we're proposing today would give the President the opportunity to do.

Q But can you just go over one last time some layman's terms, and I know
McClellan had talked about it before, and I'm sure you probably talked
about it at the top of the call, just more about the language or the
difference from the ruling, the Supreme Court eight years ago?

DIRECTOR BOLTEN: The key difference is that the proposal that the
President is making today would give him the authority to line out
individual elements of spending -- but, unlike the provision that was found
unconstitutional a decade ago, it would not give him the unilateral
authority to cancel spending. The President would send forward a
legislative package with the rescissions proposed in that package, then
available for an up or down vote in both Houses of Congress within 10 days.

Q Wonderful.

DIRECTOR BOLTEN: Is that clear?

Q It's definitely very clear. And then the other thing you had
mentioned, and I think this is when I had just jumped on the call late, was
that you were saying that you see a lot of enthusiasm in Congress on this.
Can you just -- what are you hearing from Congress, in this sense it sounds
like more people, especially now -- it sounds like Kerry is on board with
this new language that you're proposing. Can you just talk quickly about
that?

DIRECTOR BOLTEN: We've done a number of soundings on the Hill, and
listened to what a number of members have said in public and in private.
And while something like this is always difficult to do, especially
something that affects the relationship between the Congress and the
President, we're getting a broad-based indication of support from both
right and left, and Republican and Democrat. We're hopeful it will be
enough to get a proposal through the Congress this year.